Members of the Senate Finance Committee were celebrating a legal opinion by the Government Accountability Office declaring a letter from the Centers for Medicare and Medicaid Services limiting states’ ability to expand the Children’s Health Insurance Program as a proposed rule that should have been vetted by Congress.

CMS issued the letter, which insisted that 95% of all children below 200% of the poverty level must have verifiable health insurance coverage before any additional children could receive care through the state CHIP programs, on August 17 of last year.

“The August 17 letter from CMS to state health officials is a statement of general applicability and future effect designed to implement, interpret or prescribe law or policy with regard to SCHIP,” concluded GAO general counsel Gary Kepplinger in the ruling. “Accordingly, it is a rule under the Congressional Review Act. Therefore, before it can take effect, it must be submitted to the Congress and the Comptroller General.”

The ruling was issued in response to a letter by Sen. John Rockefeller, D-W. Va., and Sen. Olympia Snowe, R-Me, who serve on the Finance Subcommittee on Healthcare. The Congressional Research Service reached a similar conclusion on the August 17 letter earlier this year.

“Both GAO and CRS have now confirmed what so many of us have known for some time, that the administration clearly overstepped its legal authority in issuing the August 17 letter,” said Rockefeller. “The directive is a bold-faced attempt to subvert the law and prevent states from implementing their plans to provide health insurance coverage to millions of uninsured children nationwide. CMS now has a critical choice to make: rescind the rule or continue to spend taxpayer money defending a growing list of lawsuits it is unlikely to win.”

Snowe also chastised CMS for choosing to “circumvent the rules and go their own way.” Given the GAO’s opinion, “this is clearly the wrong approach,” she said. “That’s why we have encouraged the administration to rescind their August 17th directive and try to develop a workable consensus–with proper notice and full opportunity for public comment–on how to balance expanding CHIP eligibility with enrolling the lowest income children first.”

The chairman of the Finance Committee, Sen. Max Baucus, D-Mont., also praised the ruling, saying it would help states provide health coverage to more children.

“This legal opinion will help to ensure that thousands of American children whose parents cannot afford health insurance can now get the doctors’ visits and medicines they’re meant to have through the Children’s Health Insurance Program,” he said. “CHIP supporters knew that CMS had overstepped its bounds by trying to tie states’ hands when it came to covering kids in need, and now the GAO has issued a firm legal opinion saying the same.”

The letter was issued during the height of a debate between the legislative and executive branches over a potential expansion of the SCHIP program. President Bush vetoed legislation that would have allowed for an expansion to the program for those making more than the current 200% of the federal poverty level, arguing that the program should focus on helping the poorest children. Advocates in Congress for allowing the expansion sought to overturn the veto, but were ultimately unsuccessful.